The OEM Handoff

Shifting Risk and Accountability to the Supply Chain

Relentless price pressures and increased demand from aerospace operators are driving large companies at or near the top of the supply chain to shift even more responsibility for innovation and productivity gains to the smaller, lower-tier builders of components and subsystems. Suppliers are now asked to sign long-term supply agreements (lasting 10 to 15 years), promise regular price reductions and accept liability should something go wrong. In response, suppliers must make significant strides to drive down costs and meet delivery times or face significant penalties.

...Our customers are pretty demanding, and there are some pretty high expectations on time and on budget.

Stephen Shaffer

Chief Information Officer, GDC Technics

Business challenge

Design and Deliver More Complex Parts at Lower Costs

While aerospace suppliers are now accountable to drive significant cost reduction and ensure quality, they must also create increasingly complex components and systems to meet today’s demands. This requires significant investment in new engineering and manufacturing capabilities to drive innovation while trying to drive down the cost per unit.

Supplier-created content represents 50-60 percent of the value of an aerospace system.

Bob Stevens

Executive Chairman, Lockheed Martin

Business challenge

Increased Aerospace & Defense Demand and Agility in Rate

Commercial airframe manufacturers are sitting on backlogs equivalent to about eight years’ worth of production. To meet the demand, suppliers must reorganize their manufacturing plants to make them leaner, more agile and more connected in order to drive operational efficiency.

A fifth of suppliers are at risk of not being able to deliver the ramp-up that is required.

Greater Air Travel Demand, Globalization and New Markets

Air travel is projected to grow more than five percent annually over the next 20 years, fueled by an increase in the world’s middle class. To meet this demand, OEMs and Tier 1 suppliers are restructuring to penetrate deeper into high-growth markets, acquire enabling technologies and/or position themselves for new sales opportunities. In addition, the growth of new regional OEMs will continue to drive this globalization trend. Suppliers will need to adapt to extend their footprint into developing markets or risk being left out as OEMs seek to integrate their supply chains to drive efficiency.

We project 7.2 billion passengers to travel in 2035, a near doubling of the 3.8 billion air travelers in 2016.

The International Air Transport Association (IATA)

20 Year Passenger Forecast

Solutions

Meet OEM Customer Demand on Time, on Target and on Cost

Now aerospace and defense small and medium-sized suppliers can accelerate delivery from initial concept to full production by up to 50 percent. Learn how suppliers can thrive in the highly competitive aerospace market and improve gross margins, revenues and market share.